Warner to manage Paramount DVD library

Paramount Pictures will have Warner Bros. manage more than 600 title from… (Anne Cusack )

Warner Bros. will manage most of Paramount's movie library on DVD, in a first-of-its-kind deal between major studios that reflects the ongoing decline in disc sales.

The companies said Thursday that Warner will handle more than 600 titles from Paramount's library, including such classics as "Chinatown," "Saturday Night Fever," and "Braveheart."

The renewable three-year agreement, which takes effect Jan. 1, 2013, will allow Paramount to save the costs of manufacturing and shipping DVDs from its catalog.

Warner, which with more than 6,650 titles has Hollywood's biggest movie library, should be able to manage Paramount's inventory more efficiently by shipping them together with its DVDs and also packing certain classics from the two studios together for sale.

The agreement comes amid a seismic shift in the home entertainment market. DVD and Blu-ray disc revenue dropped 43% between 2006 and 2011, according to the Digital Entertainment Group.

"The catalog business is the one that has been affected the most by changes in consumer spending," said Paramount Vice Chairman Rob Moore. "Leveraging together products and leveraging efficiencies is important to our business now."

Going forward, new Paramount releases will transition to Warner's control after they have been on sale for 26 weeks.

However, Paramount will retain DVD rights to about 100 of its bestselling titles, including the "Transformers," "Star Trek" and "The Godfather" series, as well as the global hit "Titanic." It will also continue to control the digital sale and rental of all its movies online through organizations like Amazon and iTunes.

As part of the new deal between the two studios, Paramount also agreed to sell its movies through Flixster, the online movie service owned by Warner Bros. that already offers movies from Universal Pictures and Sony Pictures, as well as Warner. Paramount will also let consumers use Flixster to access digital titles they own in the cloud as part of UltraViolet, the multi-studio digital initiative in which Warner has been playing a lead role.

Should Paramount be happy with its digital experience, the agreement gives it the option to become a minority participant in Flixter's future profit.